Economic Duress

• Economic duress is defined as a threat (or pressure) of financial damage to the claimant's business or them personally which forces them to enter a contract. Any contract made under economic duress is voidable.
• Firstly, there must be pressure. It can be difficult to draw the line between legitimate commercial pressure to negotiate a contract which is a fact of business life and intimidation. Economic duress is such a degree of coercion that the other party is deprived of free will and agreement (THE SIBEON & THE SIBOTRE), it has to be more than 'normal commercial pressure' and therefore beyond the usual rough and tumble of business dealings (INTERFORTO V STILETTO VISUAL).
• The pressure used must also be illegitimate, this means a threat that is improper and not just acceptable business negotiation (THE ATLANTIC BARON). Economic duress does not generally occur when the action threatened is lawful (CTN CASH & CARRY v GALLAGHER) where the seller had the right to withdraw credit at any time. However, there can be illegitimate pressure even where action threatened is lawful (PROGRESS BULK CARRIERS V TUBE CITY). Lord Hodge in the recent case of PAKISTAN INTERNATIONAL AIRLINES V TIMES TRAVEL (UK) held that lawful pressure on its own is NOT enough for Economic duress, the defendant's behaviour would have to be 'morally reprehensible' to be enough for.
• Economic duress also involves compulsion or a lack of practical choice for the victim (UNIVERSE TANKSHIPS V INTERNATIONAL WORKERS FEDERATION). The claimant must be in a situation in which they realistically HAVE to enter the contract because there is not alternative, if they did have an alternative course of action this will be seen as a business choice and not duress.
• For economic duress, the loss needs to be substantial, possibly involving a loss of livelihood.
• Additionally, the party seeking to claim economic duress must: have 1) protested, 2) not have any other options and 3) not hesitated in taking steps/legal action to avoid the contract (PAO ON V LAU YIU LONG). If a party seeks independent legal advice before complying with a threat, they may be seen as taking a business decision and be unable to claim duress (PAO ON).
• The right to end a contract for economic duress may be lost through a lapse of time (THE ATLANTIC PETROLEUM GEO-SERVICES). However, if economic duress is proven the only remedy is restitution which is an equitable remedy where the court can make an order which restores the claimant into a pre-contract state.